A slowdown in the economy is inevitable?

PMR team

March 31, 2019

Share this article:

Contrary to earlier announcements, 2018 did not end with a budget surplus. Deficits of around PLN 10 billion were recorded. The deficit of the entire public finance sector amounted to 0.5 percent of gross domestic product. This was reflected in the public debt to GDP ratio. It decreased from 50.6 percent to 49.2 percent. Therefore, the costs of servicing the public debt also decreased (to PLN 28 billion, or 9.2 percent) of state budget expenditure.

All this is happening with increased spending on social purposes. Since the launch of the "Family 500+" program, approximately PLN 59 billion has been spent on this purpose. Lowering the retirement age also cost a lot. However, it turned out that more and more contributions are being paid to ZUS. Last year, it was PLN 20 billion more than in the previous year.

Tiger out of breath

This is the state of affairs today. According to all signs in heaven and on earth economic slowdown is inevitable. The Polish tiger may get out of breath. Analysts from PMR Restrukturyzacje SA warn, for example, that the conditions for doing business for Polish enterprises. It is mainly about problems with finding employees and rising costs employment. It is also not yet known how they will shape electricity and gas prices and fuels. As they increase, the willingness to invest will decrease.

Today's turmoil in electricity prices may mean that we will be at risk of a blackout in the summer, i.e. power outages - yes experts warn. Every day, energy companies report losses that delay necessary investments.

This poses a risk that companies will not be able to keep up with demand.

– For example, Tauron or Jaworzno Power Plant. And it is not without significance, that is why that some powers are also falling out of the market – says expert Marcin Roszkowski from the Jagiellonian Institute.

As a result, when the hot summer comes, there may be a shortage of electricity in Poland, as in 2015. That is when serious problems will begin.

The coming years will be marked by smaller investments

The Polish economy is not well served by the low level of investment.

– This will not allow us to maintain the growth rate at the current level – says Prof. Witold Orłowski. – When asked why they are not investing, entrepreneurs answer unanimously – because of uncertainty.

In the coming years, the economy will slow down even more. According to the World Bank, Poland's GDP growth in 2020 will be 3.6%, and in 2021 3.3%.

– In the face of the increasingly visible deterioration of the economic situation abroad, there is no doubt that the Polish economy will not extend its excellent series of five quarters with a GDP growth rate of at least 5 percent – said Piotr Bujak, chief economist of PKO BP, in an interview with PAP.

– The element that protects us against external threats is the high stability of the Polish banking sector, confirmed in the last European stress tests, in which PKO Bank Polski turned out to be the most resistant institution to a potentially negative macroeconomic scenario out of all the institutions tested.

However, the bank's expert also sees worrying factors. These include the significant slowdown in the German economy. Brexit is also a risk factor. The British market is the third largest export market for Poland.

The situation in Italy is also worrying. This hugely indebted country is fighting with the European Union to increase its deficit. Piotr Bujak is also observing changes on the European political scene, e.g. in the popularity of various political parties. Everything will become clear after the elections to the European Parliament.